Efficient Markets Hypothesis in Foreign Exchange Market before and after the Global Financial Crisis of 2007-08
Mohsen Mehrara, Ali Reza Oryoie

Abstract
This article assesses the efficiency of the foreign exchange market after the global financial crisis of 2007-08. A BDS independence test was applied to the returns of weekly exchange rates of the euro, the Australian dollar, the Swiss franc, the New Zealand dollar, and the Singapore dollar against the US dollar, one time from 2002 to 2007, and the other time from 2007 to 2011. The result was that the returns of all of the exchange rates were independent and identically distributed (iid) before the crisis, but they were not iid after the crisis, that is, Efficient markets hypothesis cannot be rejected before the crisis, while it is rejected after the crisis. In other words, the efficiency of the foreign exchange market has fallen after the crisis. It will be discussed that it could have happened because of a substantial reduction in speculative activity caused by the interventions of the governments of the developed countries in the currency markets.

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